An appraisal of the health and welfare system and its reform

Dualism and the Racialised Labour Market of South Africa

In SA, the institutional conditions and structure of the labour market differentially shapes access to either private or public systems of care according to race and income. This occurs through the employment structure.

Figures¹ for unemployment rate derived from the national October 1994 Household Survey illustrate the historical trend.

Table 1

Social Group	Unemployment Rate
	Expanded Definition	Restricted Definition
	(percentage)	(percentage)
African	41	25
Coloured	23	19
Indian	17	14
White	6	4

(October Household Survey, 1994 in Nattrass, 1997: 253)

Most whites are regularly in formal employment and are able to make provision for private health and occupational social insurance. A higher proportion of Blacks are unemployed or in low-paid or casual jobs. They are thus unable to afford private care and thus forced to rely on public health care and welfare provision. This means that there is less incentive for whites and those members of other social groups who use mainly private care to build up the public care system.
They are able to direct the bulk of funds into the private health care system, which accounts for more than two-thirds of the total national spending on health (public and private) budget for health, but which is only used by one-fifth of the population. The corollary to this is that because whites are the highest relative earners and employed (despite rapid and significant entry of Blacks into public and private management and other high paying jobs) the tax base is also largely concentrated around them. This particular racialised, and class structured form of the division of labour shapes the institutions that condition differential access to health and social welfare in SA. This Titmuss derived framework is thus the critical underpinning for understanding both the particular structure of the system of health and welfare provision in South Africa and strategies aimed at the redress of the residual 'diswelfare' state.

The Structure of the Public/Private Mix of Welfare and Health Provision
The modern public welfare system in South Africa in 1994 consisted firstly of means-tested social security transfers; secondly, institutionalised welfare services and, finally, of limited state supported occupational and unemployment insurance. The state social security transfers consist of old-age pensions, child maintenance grants, foster-care grants, care-dependency grants and disability grants. These grants are modest and employ stringent means tests.
A contributory Unemployment Insurance Fund (UIF) was established in 1947 and exists for certain unemployed workers in the formal sector. Benefits are equal to 45 percent of the weekly wage, paid out at the rate of one week for every six weeks contributions made by workers, until a cut-off of 26 weeks pay-out is attained. Employers and workers each contribute 1 percent to the publicly administered UIF. The fund continues to exclude seasonal and domestic workers and those whose income exceed a certain level. Agricultural workers were only included in 1993 (van der Berg, 1997).

Two health insurance funds are administered by the state to cover disease or disability of workers: the occupation-related Workmen’s Compensation Fund and a Road Accident Fund. As these almost exclusively utilise private sector health care providers they might more appropriately be considered part of the private health care industry.

The Workmen’s Compensation Fund was established in 1941 to cover employed workers other than mine-workers whose income fell below a certain threshold and who suffered permanent or temporary work related disability, injury or disease. Employers make risk-related contributions to an Accidents Fund against which compensatory withdrawals are made. The stringent eligibility criteria disqualified many and resulted in the state having to provide Disability Allowances for occupation-related disabilities which should have been the responsibility of employers (van der Berg, 1997).
In addition, the Workmen’s Compensation Fund is required by law to indemnify all occupational health expenses and, since the Department of Labour is required to make up the difference between contribution income and expenditure, there is little incentive for Fund managers to control expenditure or stringently enforce premium collection (Soderlund et al, 1998: 38).
Mine-workers were covered separately under the Occupational Diseases in Mines and Works Act, which covered both disabilities and industry specific, mainly respiratory diseases. Both of these pieces of legislation were replaced in 1994 by the Compensation for Industrial Injuries and Diseases Act which improved coverage and removed racial discrimination (van der Berg, 1997). The Road Accidents Fund (formerly the Multilateral Motor Vehicle Fund) compulsory insures against disability, medical costs and earning losses resultant from motor vehicle accidents and is funded by a levy on vehicle fuel with the balance made up by the state. Rapid escalation of costs occurs as a result of claims being decided in a court of law after the accident and on the basis of a legal submission done on behalf of clients. The adversarial nature of claims also contributes to the comparatively high legal costs (Soderlund et al, 1998: 39).
Alongside these publicly provided services exists an occupational social insurance and health care industry for those with the means to afford such care. The occupational social insurance component comprises occupational retirement insurance funds in the main. Their assets were equal to 73 percent of annual GDP in 1993. These retirement funds cover most industries but with low coverage in agriculture, domestic services, trade, catering and accommodation (van der Berg, 1997).
Civil servant pension funds are covered under these arrangements but, as pointed out by van der Berg (1997), they are politically distinguishable in that they have been used by the state to establish political patronage relationships, to sustain political loyalty and to legitimate the system of "Grand Apartheid" in the pre-1994 period. Their role can be likened to that of the differential welfare provision for civil servants introduced by Bismarck to secure their loyalty to the state and to erode the potential influence of class solidarity with Marxist working-class movements through status differentiation (Esping-Andersen, 1990: 24). The prescribed investment requirements of civil servants pension funds and the ability of civil servants to "buy back" years of service have seriously depleted these pension funds.
Van der Berg (1997) contends that, despite the absence of legal compulsion, these occupational retirement funds should be regarded as social insurance in the more orthodox sense due to the mandatory enrolment in either provident or pension funds required of employees, coupled with the body of agreements and conventions which exist between employees and employers in formal sector employment.
Occupational pension schemes cover an estimated 73 percent of the formally employed, although the presence of large-scale unemployment means that only some 40 percent of the workforce is effectively covered (van der Berg, 1997). It thus cannot be considered a national system of social insurance coverage.
Employees and employers each contribute 7,5 percent of wages or salaries to the funds on the basis of the monthly wage and the workers claim benefits upon retirement. The 16 000 retirement funds are circumscribed by regulations under the Pension Funds Act of 1956. They provide for a defined contribution scheme (dependent on benefits and returns on investing the funds which are then converted to an annuity for the duration of the beneficiaries lifetime) or on a defined benefit fund (based on a percentage of salary times the number of membership years, which is converted to a monthly pension). Employers are responsible for funding the difference between the obligation and assets of the funds and gain significantly from the departure of employees who leave the bulk of the employers contribution and investment behind (van der Berg, 1997).
Retirement funds are not portable between funds, so employees who leave employment obtain a certain share of the benefits, which is paid out to them and they cannot resume the retirement fund with a new employer. The means tested nature of the state social pension combined with the limited amount of free income which an employee is permitted by the means-test could result in a "poverty trap". This can occur where the existence of private retirement benefits rule out the obtainment of a state pension and the meagre benefits of the private retirement fund (especially if the workers leaves their employment before maturity of the premium is reached) fall's below the monthly amount received in a state pension. Finally, because the present means-test penalises possession of assets, low income workers who enrolled in provident funds opposed to pension funds because the former allowed for lump-sum pay-outs to purchase homes, land or cattle, are now adversely effected (van der Berg, 1997). The cumulative effect is to punish low-income workers for making retirement provisions while protecting the privileged status of high-income workers who do not require state support.
Public health services are provided at national, provincial and local government levels. The national department of health is responsible for determining policy norms, and standards to ensure a functional national health service at all levels of government. It provides services at national level that cannot be provided cost-effectively at lower levels, such as specialised laboratory services and diagnostic, control services for major epidemics and promoting national campaigns for a healthy life-style.

The provincial health departments are responsible for provincial service delivery within national policy, norms and guidelines. The major public services provided are specialised and regional hospital health services, medical emergency services, occupational health services, non-personal health services and specific provincial programmes such as tuberculosis.

At the local level the major health services provided are community hospital health care (non-specialist and non-emergency), health promotion, community level health care such as nutrition services, appropriate treatment of diseases and injury, mid-wifery, maternity and family planning services, primary environmental health services, mental health services, treatment for chronic diseases, elderly care, oral health services, care of the terminally ill and preventive and promotive services for communicable and non-communicable diseases.